INTERVIEW OF THE PRESIDENT
BY AL HUNT OF THE
WALL STREET JOURNAL AND CNBC

The Roosevelt Room

3:24 P.M. EDT

Q Mr. President, thank you for being with us. Let's talk about the
American economy for a moment, which is really the envy of the world
today. Federal Reserve Chairman Alan Greenspan says that it's the best
economy in modern memory. But in your view, are there one or two
developments that could jeopardize these good times?

THE PRESIDENT: Well, I think the thing that I'm most concerned about
today is the necessity of having growth in every major region of the
world to sustain our own. I mean, we're now in a position where about a
third of our growth is due to exports, where a significant percentage of
them go to Asia. And our own analyses are that the Asian financial
crisis, within its present parameters, won't have a terribly destructive
impact on the American economy now. But if we had slow growth
everywhere at once, it would, which is why I think it's other important
that we support the IMF and have a really disciplined effort to try to
help move the Asian countries through this financial period and get them
back to growth again.

And I feel the same way about what I'm trying to do in Africa as well.
I just think that we have to understand that our welfare is more
inextricably tied with others than ever before. So that's one of the
things that I'm quite concerned about.

Q In that context, the greatest threat in Asia, most experts think, is
Japan. You and Secretary Rubin have encouraged, have cajoled, have
pressured the Japanese to try to stimulate their economy, where it
always seems to be too little, too late. What are the consequences if
that persists, both in Asia and for the United States?

THE PRESIDENT: Well, let me say, this last stimulus package, if it's
real, that is, if it's real money and it's implemented rapidly and
vigorously, I think it will be a plus --

Q You think it's sufficient --

THE PRESIDENT: Well, I think -- let me finish, if I might. I think
that it might be enough on its own terms if, in addition to that, they
have other reforms in the economy, you know, to open the economy, to
subject it to more genuine competition and open markets. Then I think
between the two of those things you would really get growth going again.
I think at least there is a chance that it is.

One of the problems that the Japanese have in their political system is
that, because the pressures against doing these kinds of things are so
enormous, very often they can be proposed and then their impact can be
watered down or delayed in ways that make it difficult to implement.
But if they actually do what the Prime Minister has proposed and they do
it quickly, and they follow it up with other reforms with banking and
competitive market reforms, then MORE I think that there is a chance we
can see some real movement in Japan. And, of course, that would lead
the whole region out.

And Prime Minister Hashimoto has got an enormously difficult challenge
now, but he's a very able man, he's a strong man, and he's trying to, I
think, really come to grips with this. And I'm hoping that he'll be
able to.

Q You're going to China for almost a week this summer. Is there any
chance you'd stop over in Tokyo to talk to the Japanese about this
economic situation?

THE PRESIDENT: Well, I hope to see Prime Minister Hashimoto for an
extended period in Birmingham, in England at the G-8 meeting before I go
to China. I would not like to wait that long. I'd like to have the
chance to really sit down and visit with him and see what, if anything
else, we can do to help before then. So I'm looking forward to blocking
out some good time on my schedule when we're together for the G-8
meeting.

Q And no reason then to go to Tokyo on your trip to China?

THE PRESIDENT: Well, my instinct is to treat this as I would another
-- any other state visit, just to go and come. But I have been to Japan
a couple of times, and I expect to go back again before I leave office.
But I think what we need to do is to deal with this financial challenge
they face as old friends and allies in a very straightforward way. I
don't think that the symbolism of a visit is nearly as important as the
reality of a partnership, and I'm going to do my best to be a good
partner to them.

Q You mentioned the meeting coming up in Birmingham, England. What do
you expect to come out of that other than a call for more financial
disclosure from other nations and the IMF? Is there any more
substantive --

THE PRESIDENT: Well, I hope so, because I think that we really -- I
hope we'll do a G-8 version of what we were doing at the Summit of the
Americas in Santiago. I thought what we -- I hope we'll be talking
about how globalization can work to the benefit of all the peoples in
our countries, and then how it can only work if we're benefiting other
nations as well.

Now, let me just give you an example. Great Britain now has a low
unemployment rate, and the Dutch unemployment rate is down, but a number
of the other European unemployment rates are still high, even though
they're enjoying growth. The Canadians have had strong growth for the
last couple of years. Their unemployment rate is only now beginning to
yield to it. So there is a lot of interest among the G-8 about how they
can generate more jobs without increasing inequality and without
undermining growth.

So I expect we'll be talking about things like the earned income tax
credit in the United States as a device for reducing inequality, but
still increasing employment. I know we'll spend a lot of time on the
training of the work force and wealthy countries' significant obligation
to upgrade the skills of their own people because of the change in the
globalization of the economy. So I think we'll have a lot of things
that really affect people on the street in America and in these other
countries.

Q Let me ask you a question about the European Monetary Union, with I
guess 11 countries coming together. There has been a lot of celebration
of that. Your administration has been very supportive. And yet, isn't
there a concern that when you have countries with such incredibly
diverse cultural and social and economic and political systems, that
rather than lead to more unity it could produce more unrest, more
disunity?

THE PRESIDENT: It could if people feel that it's been sort of imposed
on them. But I believe that the general tendency toward political and
economic union in Europe is a positive one. The United States has
supported it; I have personally supported it strongly. So I think
that's positive. I think the efforts made by many European countries to
get their fiscal house in order, get their deficits down so they can
qualify for membership, has been truly impressive.

And the European states themselves will have to decide how they want to
unify politically and economically, but if they choose to do this
European Monetary Union, I want to be supportive. But I think that in
order to make it work, they'll have to do other things as well. They'll
have to find a way, first of all, within their countries to preserve a
sense of sovereignty and integrity in these other countries while
they're unifying the currency. And then, in dealing with the United
States and others, they will have to find a way to continue to make sure
that they're sending us the right signal that they're opening their
economy -- they're unifying, but they're not closing others out, they're
opening. And we are in negotiations and discussions with them now about
how we might do that. So, on balance, I'm positive about this.

Q Let's return to the domestic economy for a second. We now had six
quarters where the economy has grown more rapidly than even your most
optimistic of advisors, the latest just being in the last few days. But
given the inevitable business cycle, do you think it's time to at least
start to consider tapping on the brakes so you don't have to slam them
on later?

THE PRESIDENT: Well, I think the only reason to tap on the brakes with
high growth and low inflation is if you think it will actually prolong
the period of growth. And there is a lot of debate out there in the
world today about the nature of our growth and what would stop it and
what would keep it going. So I think that the judgment ought to be what
are the mix of policies we can adopt that are most likely to keep this
period of economic growth going for the longest period of time.

I don't believe we've repealed the business cycle, but I think perhaps
we've fundamentally altered it. That is, if you look at the impact of
the technological revolution working through the economy, which is, I
think, giving us higher productivity levels than we can measure
accurately -- I think if you look at the globalization of commerce and
America having still a relatively open economy, which keeps inflation
down by having everything subject to more competition, if you look at
the benefits we're reaping now from the painful adjustments that were
made in the 1980s by the business community -- all these things
happening now -- I think there is a chance that we now know it's more
possible than it used to be for a government to have a prolonged period
of g rowth if it's properly managed.

Do I think that there is no business cycle and that the laws of supply
and demand in the global context never come back to shorten the leash on
a country? No. I think it's still out there. But I think we can
continue to prolong this if we do the right things.

Q Just to follow up for a moment, your predecessors were always --
several -- were quite critical of Chairman Greenspan whenever he put
brakes on. Your administration, particularly Secretary Rubin, have had
very good ties with Chairman Greenspan. Do I take it from that answer
that, whereas your not encouraging him to tap on the brakes, that you
wouldn't be critical if he did?

THE PRESIDENT: Well, we've tried to work together while respecting our
independence. And I have believed always that if I provided America
with a responsible budget that was moving toward balance so that in the
short-term we were behaving in a responsible way, and that had the
long-term investments necessary to triumph in the kind of economy we
live in, that that would permit him to do his job with the lowest
possible interest rates. That is, I thought he would be able to leave
interest rates than he otherwise would feel he could. I think on
balance that's what's happened.

I know that he couldn't possibly agree with every decision I've made in
the last five and a half years, and he put the brakes on pretty tight in
1994, trying to keep this thing going. And we had a big -- we had a
pretty good slow-down, but then we were able to keep it going, keep the
expansion going. And so it's continued right the way through until here
we are, almost to the middle of '98. And I believe that he'll do what
he thinks is right for the long-term interests of the American economy.

Q You were asked the other day at your news conference about the stock
market continuing to go up, and you were an optimist. If you were
private citizen Clinton today, would you invest in the market?

THE PRESIDENT: Yes, but I would also recognize that it goes down and
it goes up and it goes down and it goes up. And what the American
people need to know is that if you can hold your investments long
enough, over any given 15- or 20-year period, the stock market has
always out-performed private -- I mean, government bonds in earnings.

The insecurity is if you enter, particularly if you enter at a fairly
high point now and you happen to get one of those downward bumps and you
have to liquidate your investment. Then you could lose. But if you
look at the stock market -- the stock market has always tracked the
fundamentals in the end. And I just feel that if I can work with the
American people and keep the fundamentals good, keep productivity up and
investment for the long run up, keep the unemployment rate down, keep
the inflation rate down -- if we keep the fundamentals in good shape,
then the stock market, over time, will track that.

And I know that there are a lot of people who are worried because it's
gone quite high lately, but the market -- they correct themselves; they
always do, one way or the other. I just think over the long run, what
-- if you're President, you can't be thinking about next month in the
market, you have to be thinking about what's the long-run economic
scenario. And then you just have to trust the market to follow the
market realities in the American economy over time. I think that's what
will happen.

Q In this booming economy, some critics have worried that it's been too
uneven. I'll give you one example: The pay of CEOs of the largest
companies last year rose 35 percent, rose 54 percent the year before.
That's 13 times greater than the pay of average workers. And I think
the figure now is that the average boss earns 326 times what the average
worker earns. Is that, a, acceptable; and, b, should government do
anything about it?

THE PRESIDENT: Well, I think that in and of itself, it's probably a
phenomenon of companies bidding for management talent at a time when
management talent is important in how these companies do in the market.
So, in that sense, it may not be any different than asking whether it's
acceptable that professional athletes earn as much money as they do.

I think the real question is, are working people earning a fair share
of their company's prosperity and their country's prosperity. And are
we, in the aggregate, decreasing the level of income and equality that
developed over the last 20 years, because we had a very -- as you know,
very sharp increase in inequality among various classes of working
people, with folks on the bottom getting the short end of the stick.
Government policies I think had something to do with it, but I think the
larger thing was that we were changing the dominant economic factors of
this age. And now the dominant economic factors relate to people's
level of education and skills, so that there became -- there's a huge
education premium now in the work force, and people that don't have it,
particularly younger workers, tend to get punished very harshly by the
low incomes they earn.

So, to me, what I've tried to do is to reduce income inequality -- not
necessarily by reducing upper-income people's incomes, except to ask
them to pay their fair -- what I believe is a fair share of the
country's tax burden -- but instead, by lowering the incomes of the
lower 40 percent of the people and trying to create more high-wage jobs
by tying more of them to trade, because we know trade-related jobs and
technology-related jobs pay 17 to 20 percent more than average wages.
And the evidence is that in the last couple of years we have slowly,
finally, begun to reduce income inequality, particularly when you take
into account the impacts of the earned income tax credit, which is worth
about $1,000 a year to a working family of four with an income under
$30,000.

Q Another of the benefits of the booming economy, of course, has been
we have something that people thought unimaginable a few years ago, a
budget surplus. The latest CBO estimate I think was --

THE PRESIDENT: Well, we hope we do. We think we will.

Q But with April receipts coming in I gather much stronger than anybody
anticipated, I've now heard some people suggest you could have a budget
surplus of as much as $50 billion this year. Is that right? Is that
reasonable?

THE PRESIDENT: Could be.

Q Could be that high? Now, you have said that you're going to veto --
that Social Security comes first with any budget surplus. If they try
and enact a big tax cut before they do that, that you would veto it.
But there's also a big spending highway pork bill coming down the pike
right now. As things stand now, would you also veto that?

THE PRESIDENT: If it got into the surplus. I met with Senator Lott
and Senator Daschle yesterday and we discussed this. And it's very
interesting -- historically, always highways have been the one thing
that Congress, whether Republican or Democrat, they always want to spend
more on than the President. And part of it is the President's desire to
maintain some control over the budget -- at least for me that's been the
case. Now, I like the -- I believe we need to invest money in
infrastructure -- in highways and mass transit and bridge repair. I
think it's good for the economy in terms of the jobs it creates, but
it's even better for the economy in terms of giving people safer roads
to travel on and less wear and tear on their cars, less accidents --
fewer accidents -- the whole thing. I'm all for this.

And we need more mass transit because, among other things, it's an
important part of the welfare reform component. If we're requiring
people who are poor and on welfare to go take jobs and they have to
travel, they've got to have some way to get there. So I'm for a hefty
increase in investment in infrastructure.

But I think that these bill that have been passed, the thing the
bothers me is, I can't see, based on what I understand to be the
options, how either one of these bill can be funded without either
getting into the surplus or cutting our investment in education, medical
research, the environment, and other critical areas. So we're just
going to have to try to find a way to fit all these things in in a
manner that doesn't spend the surplus.

Q Let me ask you just a couple more quick questions. On Social
Security, you've said very clearly you don't want to have a specific
proposal now. But some of your Democratic colleagues -- Senator
Moynihan and Kerrey, are talking about private accounts alongside
traditional Social Security. No matter the specific details, is that a
good idea to consider?

THE PRESIDENT: Absolutely, it should be considered. But what I want
to say -- I'd like to make two points -- first is the reason that I
think it would be a bad thing for me to have a specific proposal now is
I think it would shut down debate rather than increase it. And then
everything would be, are you for or against this proposal. Right now,
we've still -- the American people I think, on this issue -- the good
news is that everybody knows something fairly substantial is going to
have to be done to make this system survive into the 21st century when
all the baby boomers retire. That's good.

Secondly, I think the younger people are, the more likely they are to
be open to all kinds of new ideas, and that's good. But I think that
what has not been accomplished yet in the public education process that
we're now undertaking this year is for people to understand the
tradeoffs involved in making a set of choices.

That is, I could call you on the telephone, and I could say I am a
reporter for the Clinton polling agency, and I'm going to ask you these
10 questions and do you like these ideas, and you might like them all.
But if I said, you can only have four of them, and then you have to rank
them in rank order of priority, that's a much more sophisticated
judgment. That's what I'm trying to get done now.

On the individual accounts, I think it's absolutely, an idea that
deserves a lot of consideration. There is some debate, as you know, in
Congress about trying to dedicate the surplus to individual accounts
now just starting. The problem I have with that proposal is that it
doesn't deal with the underlying Social Security program. What are you
going to do -- I think we still need some baseline Social Security in
the 21st century that's a baseline protection for people that may not
have a lot of money in the market, or may lose some in the market, or
don't have a chance to accumulate a lot of wealth, and we've got to
know how we're going to fix that. And then, the people -- admittedly,
that's what Senators Moynihan and Kerrey tried to do. They tried to
guarantee a baseline Social Security benefit and, over and above that,
have an individual account. And that's one of the things that I think
ought to be fully explored here.

Q We only have a few more minutes, but as long as we're talking about
whether things are good or bad, there have been a rash of big mergers
lately, particularly in the financial service banks. Do you think
generally, without commenting on any one, but as a general proposition,
is that good or bad for consumers and the economy?

THE PRESIDENT: I don't know yet. I think to some extent, they were
inevitable because of both the nationalization of finance, bank finance
across our whole country, and the globalization of commerce, which puts
a premium on bigness partly so you can afford to get into new market
areas, partly so you can afford to handle bad years -- you have more
money.

So I think some of this is inevitable. I think that the test which
ought to be applied -- and I honestly have not had time to get a
detailed analysis of it -- but the test of all these mergers ought to be
this: Does it allow them to become more globally competitive in ways
that don't unfairly raise prices or cut the quality of service to
consumers in America? Or does it superficially allow them to become
more globally competitive, but, in effect, undermine their competitive
position because they're not attractive to their customers anymore
because of what happens to prices or service?

And I think that's the test we ought to apply, that's the test
government agencies ought to apply, in terms of any lawfulness -- you
know they're looking at that. But I think it's too soon to say yet. On
balance, I think it was inevitable. I think these things were coming,
and we have to do what we can to make sure that they're good for the
consumers of the country.

Q Next to the last question, on tobacco, would you be willing to give
up some of the initiatives that you have proposed as part of the tobacco
deal in order to get legislation that limits any revenue strictly to
tobacco and health related areas?

THE PRESIDENT: Well, let me say, first of all, most of the initiatives
that I proposed to fund -- in education, for example -- were not coming
out of tobacco revenues, except those that were being collected to be
sent back to the states.

Now, I wanted to say that those should be spent for the benefit of
children and smaller class sizes in the earlier grades and in child
care, and not children's health, for the simple reason that in the
Balanced Budget Act we had the biggest increase in children's health in
35 years.

If Congress wanted to give the states some more flexibility in spending
that money, we could argue about that, but that wouldn't be a deal
breaker for me. We can also have a debate about that in the election,
whether I was right or they were right and what we should do with the
priorities in the future.

My sole concern, in terms of what bill I would sign or not, is the
question of whether it will substantially reduce teenage smoking and
thereby lift the health fortunes of all these children that are
otherwise going to be imperiled.

Q Do you think the McCain bill does that, is that correct?

THE PRESIDENT: I do. I do. There are a couple things that if I were
writing the McCain bill I'd change and maybe we can even get a few
changes in it. And I'm sure there are people on the other side who
would like to change a couple things about it. But I think that the
McCain bill is -- I think Senator McCain and the Democrats and
Republicans who worked with him -- keep in mind, 19 people voted for
that bill -- made an honest effort to, first of all, protect our
children from the dangers of tobacco; secondly, raise enough money that
we can invest it in an advertising campaign and medical research and to
do the things that ought to be done from a health point of view; took
decent care of the tobacco farmers, gave them an opportunity to buy
their way out of what they are doing now in ways that seem to find favor
among the farmers; and basically did the kinds of things that ought to
be done. It's certainly a good vehicle through which we can work to try
to get a bill out of the Senate and then hopefully get one out of the
House.

Q Last question. One of the reasons the economy has done so well is
unsurpassed consumer confidence. Consumers really feel good about how
things are going in general. If you and Independent Counsel Kenneth
Starr become embroiled in a huge high-stakes battle over impeachment
charges and counter charges, could that threaten or jeopardize consumer
confidence in general?

THE PRESIDENT: Oh, I don't think so, because, for one thing, I've done
my best to demonstrate to the American people that I'm letting all this
business from Mr. Starr be handled by my lawyers and others speaking on
my behalf, that when I have to answer questions about it, I do, but that
I'm working on their business. And I'm very optimistic about it. So I
don't think that anything that can conceivably happen is likely to
impact on consumer confidence -- unless somebody tries to do something
completely irresponsible and insupportable. By the facts at hand, we're
going to be fine on that.

Q Or impact upon your stewardship of --

THE PRESIDENT: No. No. I think that early on in this process I was
somewhat bewildered by it and it was distracting. And finally, I
decided what I owed the American people was not to be distracted, and so
I'm doing pretty well now, and I intend to keep right on doing it.